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What are the world’s riskiest climates?

Commentary: Impact investors need to know where their money is

By

ThomasKostigen

SANTA MONICA, Calif. (MarketWatch) — If superstorm Sandy had occurred in the developing world, the damage, destruction, and number of lost lives would have been far more grave.

The United States has relatively sophisticated infrastructure, communication, and response systems in place. The developing world lacks those facilities and many emerging markets therefore are more susceptible to storms and foul weather. In turn, businesses that operate in those areas pose more risk to investors; operations are in danger of disruption or outright failure.

This is an interesting quagmire for impact investors. Many if not most of the social enterprises that comprise the impact investing sector are located in the developing world. And many of these enterprises are begun with the mission to better the planet.

A solar lantern company operating in Kenya, for example, mitigates air pollution that can effect the environment. A filtration company in Sierra Leone helps keep the natural coastal storm barriers in place. An ethical farming operation in South America prevents soil erosion. Etc.

But what happens when these businesses themselves are subject to environmental hazards? It doesn’t make sense to abandon investments that are vulnerable in the short-term but help stabilize the environment for the future.

Some of the impact investors I spoke to say natural hazards go with the territory and are considered market risk, just like with any other type of investment. To stave some of that risk they say a balanced approach is needed in the impact sector. In other words: spread your bets and along with them your risk.

Opinion: Don't blame climate change for Frankenstorm

These countries are important to note not only for investor who make direct investments in these areas, but for investors who have indirect exposure. Multinational corporations, of course, use the workforce and manufacturing capabilities these countries offer.

Thailand’s flooding is a chronic business risk. Last year the floods there were so severe they disrupted the disk drive supply for Dell computers and crimped revenues. This year the flood waters continued. Moody’s estimates the floods will cost Thailand more than $6.5 billion.

Vietnam, Indonesia, and India, home to manufacturing giants, also are rated as extremely vulnerable to climate change.

As climate change’s effects climb and now even meet us at our front doors, it’s more and more necessary to evaluate our holdings with extreme weather in mind.

Maplecroft’s mapping system is one way to see the impacts of climate change. (www.maplecroft.com) Investors should also be using mapping overlays for their portfolios. (Note to Google: as you rework your mapping programs, how about adding a geoweather app for the business community? Commodities traders use these. Why not one for retail?)

Where we are invested is now just as important as what we are invested in. Know what are the world’s riskiest countries with respect to climate change, and find out what your investment exposure is — directly or indirectly.

More extreme storms are predicted.

Thomas M. Kostigen is a best-selling author whose latest book Golden Dawn is available in bookstores now.

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